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Digital Document Solutions Help Car Dealerships Solve 6 Key Challenges

Written by Thomas Schneck | Feb 9, 2017

Car dealerships face a particularly challenging set of business challenges – challenges that an enterprise document management system can help solve.  Digital document solutions should be an integral part of the information management infrastructure for any forward-looking car dealership. 

Most Dealership Management Systems contain an option for document management.  However, the capabilities and costs for the document management option vary widely, so car dealerships must be careful not to overpay for limited document management functionality.  Digital document solutions should be at the center of your automation initiatives; download Cost-Effective Document Management: A Guide For Mid-Size Businesses and get the facts.

What are the 6 key business challenges facing car dealerships?    

  1. Technology disruption.  The Economist believes that technology is diminishing the role of car dealers.  “Customers are using the internet for much of the process of choosing a new car, and are increasingly getting loans and insurance online rather than buying them from the dealer who sells them their car… In many cases car buyers turn up having already decided which model and which options they require; and, having checked price-comparison websites, how much they will pay… The role of traditional car salesmen, geared for the hard sell, is waning.”
  2. Narrowing margins.  Jason Lancaster of AccurateAutoAdvice.com notes that most new car dealers earn a 1-4% margin, depending on the brand(s) they carry and the marketplace in which the operate.  Despite these narrowing margins, The Economist notes that dealers “are desperate to remain the source of new cars even though they often make little or no money flogging them.”  Why?  Because “selling new cars is the engine that drives the rest of their business—finance, insurance, warranties and other aftermarket products.”
  3. Customer dissatisfaction.  According to The Economist, “Surveys show that car buyers find the experience of visiting a dealer boring, confrontational and bureaucratic, notes Nick Gill of Capgemini, a consulting firm. No wonder they try to avoid them. Ten years ago, Americans visited five dealers before making a purchase, according to McKinsey, another consulting outfit, but now they visit 1.6 on average.” The AutoTrader Car Buyer of the Future Study notes, “Less than 1% of customers would chose the current car buying experience as the ideal one.” 
  4. Rising regulatory requirements.  Finance and Insurance (F&I) is a significant source of margin for many car dealerships, particularly as margins on the car itself have been squeezed. Federal compliance regulators such as the Consumer Financial Protection Bureau are placing increasing audit, documentation, and disclosure requirements around F&I products, created increased paperwork and costs for many dealers.
  5. Changing relationships with manufacturers.  First Research, a division of Hoovers, notes, “Greater efficiencies in manufacturing, transport, and inventory management have reduced the strategic need for independent dealers. Now the big car companies can potentially produce cars by special order in as little as one week, which could lead to direct sales from car companies to consumers, with local dealers acting only as distribution and service locations.” According to The Economist, “the most controversial experiment is the one that Tesla, a maker of expensive electric cars, is trying: cutting out the dealers altogether and selling directly to motorists. Two decades ago Ford and General Motors tried to revive this idea from the industry’s early days, but they were deterred by resistant dealers and restrictive laws in some American states.”
  6. Volatile demand. First Research observes, “Consumer demand for cars can vary significantly from year to year, due to a variety of factors, including changing economic conditions, consumer spending, inflation, and fuel prices…Significant increases in interest rates can reduce consumer ability to buy cars and increase floor plan financing costs.” 

Boyd Warner, co-chair, of AutoAlert®, Inc., believes that technology investment and innovation should be a strategic priority for car dealerships in meeting these challenges. “New technologies for F&I, service, and inventory help dealers boost per vehicle retail profitability, streamline service operations to maximize bay utilization, and improve inventory turn and gross. Technology that can help the dealership create its own market can be a highly effective profitability tool. By its use, almost any dealership can boost the sale of another 10 to 20% additional units a month.” Process automation and getting rid of the paper should be a core part of this strategy. 

Consider just a few of the documentation-intensive processes that are critical to the success of any car dealership:

  • Sales
  • F & I
  • Service
  • Parts
  • Online Sales
  • Used Car Sales
  • Fleet
  • Accounting
  • HR 

Start thinking about how a dedicated enterprise document management system can streamline these processes – and do so at a price point that is a fraction of deploying these capabilities through a Dealer Management System.

Download Cost-Effective Document Management: A Guide For Mid-Size Businesses and get the facts.